The current business scenario ended up breaking down several barriers, and now there are more customers who demand the online services of financial institutions, which are challenged to facilitate digital processes and in turn apply strict security standards.
In the last four months, in most Central American cities, bank clients have moved away from the bank's service points, because between the home quarantines decreed due to the spread of covid-19 and the preference to avoid attending places where large numbers of people can congregate, consumers are choosing to look for ways to carry out transactions digitally.
The coronavirus has left an economic impact in several countries. For this reason, some governments are developing exceptional measures to mitigate its effects. For example, the suspension of tax and mortgage payments to lessen the economic pressure on small businesses and households.
In the United States, interest rates were reduced to almost zero and a US$700 billion stimulus program was launched in a bid to protect its economy, says Mario Miranda, director of finance at MonederoSMART.
A law has come into force which requires banks to register as atypical all transactions of more than $4 thousand that are realized in cash.
The decree by the Central Bank which comes into effect from April establishes new requirements for banks when dealing with transactions made both in domestic and foreign currency, as well as cash or through other means.
Although profitability of the entities is adequate, Fitch Ratings is not ruling out pressure on performance because of increased spending on credit provisions and lower growth.
From a report by Fitch Ratings, III quarter of 2016:
Concentrated financial system has adequate profitability and capitalization in Regulatory situation in process of strengthening
Amendments to the law on the financial system include changes to the conditions which must be present in order for an order to be issued for the forced liquidation of an institution.
From a statement issued by the National Congress:
The National Congress approved on Thursday, in the third and final debate, several articles of the decree containing the amendments to the Law on Financial Institutions, which aims to bring legislation into line with international standards and prevent banks from having problems which could lead to a forced liquidation, as recently happened with Continental Bank, through an early and timely action by the supervisory body, preventing savers or account holders from being affected.
The maximum amount allowed for banking transactions in cash in foreign and national currency has been lowered from $10,000 to $4,000.
From a resolution by the Central Bank of Honduras:
For purposes of the application of Articles 8, 12, 23 and 25 and in compliance with the provisions of Article 86 of the Special Law against Money Laundering the following amounts have been established:
Fitch Ratings predicts headwinds and higher risks for banks in Central American countries in 2016, resulting in lower credit growth.
From a report by Fitch Ratings Central America:
Headwind: Central American Banking systems face greater risks in 2016. A slowdown in growth of gross domestic product (GDP) in the region and, consequently, lower credit growth is anticipated.
Slow growth is projected in El Salvador, very good performance in Nicaragua, stability in Panama, more competition in Guatemala and moderate growth in Costa Rica.
From a report by Fitch Ratings entitled "2015 Perspectives: Central American Banks":
Costa Rica:
Fitch Ratings has revised the outlook for the sector from positive to stable, because the agency does not anticipate substantial improvements in respect to the previous year.
Analysis by Fitch Ratings projects that banks in the region will maintain strong balance sheets and have stable profitability in 2014.
Excerpted from Fitch Ratings:
Differential Growth and Opportunities: Low financial depth, in most systems, continues to provide significant opportunities for expansion of bank balance sheets; although this is limited by low average income levels.
It has been announced that from March Costa Rican banks will be able to allow their customers access to the Central Interconnected System of Payments.
From a press release by the Central Bank of Costa Rica:
A new service has been developed called 'Pagos al Exterior (PEX)' (Foreign Payments), which will allow individuals and legal persons resident in the country, to send and receive transfers of funds to and from accounts in a financial institution located in El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. The aim of the service is to provide a fast and secure technology platform for processing commercial payments and remittances in the region.
Warnings from Honduran businesses about the flight of capital resulting from the application of the controversial tax on banking transactions (known in Spanish as the ‘Tason’), are coming true.
This is how representatives from Honduran companies explained things, after statements from President Porfirio Lobo recognized a reduction in revenue because of the "Tason".
The proposal to tax all banking transactions has been strongly rejected.
The government aims to create $79 million to combat insecurity, which would be financed in part with proceeds from a tax of 0.2% on all transactions carried out in banks.
Industry representatives believe that this measure is excessive and that not all transactions should be taxed, as the financial cost to businesses would be very high.
The resources are to be used to finance the country's security plans.
More than $79 million is expected to be raised by collection of the security tax, which will be charged on bank transactions that exceed $3,000.
This proposal arises from preliminary agreements reached by representatives, the executive power and businesses, as a measure to support the delivery of resources to address the security issues affecting Honduras.
Panama ranks second in Latin America in number of bank branches and ATMs per 100,000 people with 90.28, surpassed only by Brazil with 99.37.
"Banking, or access to banking services, plays an important role in economic development of countries and in reducing poverty while promoting income distribution."
The article by Ricardo J. Gonzalez in Capital.com.pa discusses the results of the report of the Latin American Banking Federation, highlighting the causes for the high rate of banks in Panama, and "the important relationship between financial strength and economic growth."